First, the news: Google told me today that they would consider giving more transparency about revenue splits in Adsense.

At a private meeting with a dozen and a half media people at Davos with CEO Eric Schmidt, President of sales Nikesh Arora, search boss Marissa Mayer, YouTube founder Chad Hurley, and counsel/”chief diplomat” (Schmidt’s joke) David Drummond in a Davos apartment dolled up with lava lamps, the execs discussed China, the company’s push into display, critics from France to News Corp., Android and its phone strategy, and news.

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AdSense: At the DLD conference in Munich Monday, Burda CEO Paul-Bernhard Kallen, on a panel with Drummond, said publishers wanted transparency and their “fair share.” I asked him, a fair share of what — AdSense? Kallen said yes. And that put a fence around this debate. Drummond went on to emphasize that publishers do not deserve a share of a search for a camera that doesn’t involve their content. He also said transparency could be discussed.

At today’s briefing, Arora said that the company was considering more transparency. I confirmed with Google’s people that this was new. I suspect that they’re not going to promise the possibility and not deliver something.

I’m happy about this because, with China, this seems to strike off my two biggest complaints — both in What Would Google Do? — about Google: its prior lack of support of free speech in China and its hypocrisy on transparency and ad rates.

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China: “We made a decision that was consistent with our values,” Schmidt said. “We’re not going to operate differently in China as opposed to the rest of the world,” said Drummond.

When is Gooogle going to do something? “It should happen soon,” Drummond said.

Was Google’s original stance on China — making it an exception to its own rules — a mistake? “We said consistently we would evaluate the position,” said Schmidt, “and people didn’t believe us.”

On the attacks, Schmidt said the company had a moral need to “make sure our systems are safe from attack anywhere.”

They wouldn’t discuss any details about any discussions with China. One editor asked whether Google was upset that other companies — especially those that also suffered attacks — have not come forward to openly support Google. I went farther and said that Microsoft had thrown Google under the bus and backed up over it. Schmidt repeatedly said that he manages Google, not other companies. “We speak for ourselves.”

Drummond said the problem of censorship is not in China alone. Hurley said YouTube is blocked in China, Turkey, and Iran “because of freedom of speech.”

“I believe this is an evergreen story for Google and other online companies,” Schmidt said. “As the world goes online, every country is going to have a discussion about what’s appropriate and what’s not. And a lot of these organizations [that is, governments] have not really thought through what they’re doing. We have a strong view about transparency.” [It’s about to get a little stronger, it seems.]

Though Schmidt joked about Drummond as Google’s diplomat and apolgized for mixing metaphors, he emphasized that Google is not a country, does not set laws, and does not have a police force — or diplomats This is a government-to-government issue, he said.

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Google’s reputation: I asked whether it was lonely at the top, getting grief from France to Germany to News Corp to China. Is it because Google is so big? Is it because it is putting itself on the ledge? Is it a PR problem? Schmidt said no.

“Google is fundamentally disruptive because of our innovation,” Schmidt said. “Google, because of our architecture, does things at a larger scale than others can. We are in the information space, which everyone has an opinion on. … You asked me how does it feel from a Google perspective? It feels as if we’re in the right place.” These aren’t crises, Schmidt said. He treated them as a factor in doing business. “It’s constnat. It’s because it’s information that maters.”

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Innovation: Schmidt later talked about the difficulty we all know companies such as this can have: growing big and killing innovation. He talked about the canonical Silicon Valley story: a company starts, it innovates, it grows to middle age, it grows bored, it is sold to another company. Schmidt et al are clearly aware of that threat. Apple, he said, has “proven the model of innovation at scale.”

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Phones: Will they have a tablet? “You might want to tell me what the difference is between a large phone and a tablet,” Schmidt said.

How will they make money on phones? “Not to worry,” Schmidt said. “We do not charge for Android because we can make money in other contexts.”

The strategy, he said, is to establish volume for application development to follow. “The phone is defined by the apps,” he said.

Schmidt took my Nexus One and demonstrated Google Sky. Mayer said the guy in charge of mobile uses Google Goggles to take pictures of wine labels and search on them so he can sound smart: “It tastes of apricot blossoms.” Mayer told Schmidt about Layar (a very neat agumented reality program I wrote about here earlier); he didn’t even know about it yet.

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The economy: “The recession is very much behind us,” Schmidt said. “We see growth and successful businesses I think pretty much everywhere in the world.””

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Display ads: Schmidt said the company is “trying to apply the science of Google to the display space. Display is likely to be our next really big business globally.”

Arora said that today marketers buy sites when they want to buy audiences. He said Google will “bring measurability to the process of display” and it is “trying to find a way for the industry to bring the entire inventory together.” That is, “most agencies and buyers don’t have the tools to aggregate across publishers.” Schmidt added: “Before the google question was applied to this, you couldn’t have scale.”

Isn’t this just an ad network? Arora said it would be a collection of networks, an exchange that would “allow you to separate the best owners of inventory from the best sellers of inventory.” I don’t understand what that means and will ask.

Aren’t publishers going to see Google as again disintermediating them and hurting their brands? I asked. Google said the platform will bring greater transparency, more inventory, faster, with scale and speed and that publishers who participate will gain more revenue from the inventory they have (and don’t sell). Indeed, I was talking with one newspaper editor before the meeting as he lamented the small size of the percentage that is sold.

Mayer said Google will help publishers make more money. It will create better advertising products for them, improving display. It will provide ads that are more relevant. It will support pay efforts.

She also said Google is working on making news as compelling as possible. “The issue is one of engagement online: if they spent more time online it would be much easier to make money with it,” she said and then added that publsihers must “bring the news to users’ digital doorsteps.” Amen. I’ve written often here about the challenges of engagement and the need to think distributed. Those are ripe areas for Google to help news.

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YouTube: Schmidt said he was very pleased with YouTube and that it was making money but he and Hurley wouldn’t get in the slightest bit specific about the definition of making money (profit? cash flow?) let alone numbers. “In the last year, Chad managed to figure out a way to make money using partners and their video content on YouTube,” Schmidt said. Hurley said it took longer than expected to get their because of delays in bringing in Doubleclick. He said they have a sales force selling video in 20 countries. They also recently made a deal with channels 4 and 5 in the UK to distribute content and they’re going to live-stream cricket.

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Pay: Will Lewis of the Telegraph asked “what’s it like being so brutally attacked by News Corp. What side of genius to you think their pay wall idea is?” Of course, Google’s execs didn’t take the bait.

They talked about hybrid business models and said they’d support them and pretty much left it at that.

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Globalization: Schmidt said a majority of Google users are outside the U.S. and he expects that soon most revenue will come from outside the U.S.

When Drummond said “We’re not going to operate differently in China as opposed to the rest of the world.” Does that mean, ‘Just as we obey US law in the US, we will obey the Chinese law in China?” You know, business as usual.

Andy Freeman

> Does that mean, ‘Just as we obey US law in the US, we will obey the Chinese law in China?” You know, business as usual.

What would you have them do differently? Be specific – tell us how to figure out which exactly laws you think that Google should ignore. Are you ignoring those laws?

Of course, one way to obey Chinese law is to not operate in China.

USC Trojan

I am not sure why you are being so anti-Microsoft (I stopped subscribing to and listening to TWiG because of that). I came here via Techmeme, only to see you talk about Microsoft’s actions as pushing Google under the bus and backing up. It is one thing to be a Google fan and another to be a fanatic – you seem to be lining yourself up at the far end of that spectrum on the fanatic side.

Please be a little more sound and balanced in your writing.

http://www.buzzmachine.com Jeff Jarvis

Microsoft’s comments on free speech are sinful.

observer

You were never so preemptory when Google had the exact same position. Now that they’ve shifted (demonstrably because of defensive self-interest, not morality), all of a sudden you have a “sinful” vocabulary…. WWGD indeed. They’ll act like any big company, that’s what they’ll do! Just be consistent and fair.

@Jeff: There is a reference to what Marissa said during a search conference (or was ist PC FORUM ?): they found out that some of the best content isn’t monetized online at all because of two reasons: 1) the content was produced originally for a different channel than the web, like books, magazines 2) the content owners are not able to sell advertising.

If Google brings more and more quality content online (by scanning books for example) and is able to add a layer of monetization it would have a major effect on some companies that are great in SELLING media space but not so good in creating content.

Some of those Media Sales Companies started to sell media inventory of third parties instead of creating own content. Some of them still are known as “Publishers” but in reality they are Traders.

Google is going after those Traders that don’t add really value at the Content side of the business.

The Media Buying process is still a nightmare online – you can’t measure the quality of the content sites – so you rely on CPM or CPC which is a dumb method that heavily undervalues quality content, quality of web design, the quality of the communication channel between readers and advertisers that some media can build.

If Google gets his Doubleclick system into a level of knowledge about “quality” and what works best for advertisers it can be a real game changer for all parties that are now involved: Journalists, Publishers, Ad Agencies, Creative Agencies.